NEWS:
QUEEN'S PARK-Today, Ontario PC Deputy Leader Christine Elliott called on Dalton McGuinty to scrap the wasteful and bloated bureaucracy known as the Ontario Power Authority (OPA), whose ballooning budget and expenses are contributing to Ontario families' skyrocketing hydro bills.
Originally conceived as a "virtual" and "transitional" agency, the OPA has expanded from 15 employees when it was created in 2005 to over 300 employees today. OPA expenses have exploded by a staggering 465%. The number of OPA salaries over $100,000 has grown from six in 2005 to 75 including former Dalton McGuinty spokesperson Ben Chin who made $185,000 at OPA last year.
Longtime Liberals Patrick Monaghan, Lyn McLeod, and Adele Hurley are also on the OPA Board.While Dalton McGuinty rewards his friends at the OPA, Ontario families are seeing their hydro bills skyrocket. Hydro rates have already gone up 75 percent under Dalton McGuinty, over 100 percent if you have smart meter tax machine. What's worse, family hydro bills are expected to increase another 46 percent over the next few years, according to Dalton McGuinty's own low-ball estimate.
QUOTES:
"Six years ago, Dalton McGuinty created the Ontario Power Authority saying it was a transitional agency and promising it would produce a long-term energy plan. But all he has to show after six years are skyrocketing hydro bills and a record of backtracking from the offshore wind experiment and screwed up microFIT experiment the OPA produced for him."-- Christine Elliott, Deputy Ontario PC Leader
"When the Ontario Power Authority is not wasting money, it is busy finding ways to make life miserable for Ontario families. It's time to scrap the OPA bureaucracy and once and for all put families first."-- John Yakabuski, Ontario PC Energy Critic
QUICK FACTS:· The "virtual" and "transitional" OPA bureaucracy has expanded from 15 employees when it was created in 2005 to over 300 employees today.·
OPA expenses have grown over that time from $14.1 million to $79.7 million - an increase of 465%.·
The number of six figure salaries at the OPA has skyrocketed from six to 75 - a staggering increase of 1,250%.
Monday, March 21, 2011
Sunday, March 20, 2011
Germans should prepare for significantly higher electricity bills and more frequent blackouts.
http://theresilientearth.com/?q=content/dying-breeze
A Dying Breeze
Submitted by Doug L. Hoffman on Sun, 12/12/2010 - 16:00
The Alpha Ventus Wind Park is the first of its kind: a deep water wind farm in the stormy North Sea. It is composed of 12 turbines that together will generate 60MW of electrical power. When fully operational, the farm will be able to power 50,000 households. But barely two months after the ceremony opening Germany’s first deep water wind farm, six of the newly installed wind turbines were idle. This was not due to a lack of wind but because of gearbox damage: two turbines had to be replaced entirely, the other four repaired on site. Problems with Alpha Ventus highlight a series of poor decisions—a precipitous move to shut down working nuclear plants, rampant installation of solar cells, and a headlong rush into offshore wind generation among them—that could well have Germany facing blackouts in the not too distant future.
The six turbines that have been operating since August 2009 have supplied about 13 million kWh of energy to the grid. This is in contrast with the 262.8 million kWh of electricity that would have been generated if the turbines had operated at their rated capacity for a year. Even when located in the windy North Sea, wind turbines simply do not produce at anywhere near their rated output. Alpha Ventus generates only 1/20th its rated capacity—enough energy for 2,500 homes, not 50,000.
The problems with Alpha Ventus helps demonstrate the folly of forced installation of green power. In this case, each turbine costs $5,200 (€4,000) per kilowatt in upfront investment. This comes to a hefty $26 million (€20 million) for each 5MW turbine. Because such heavy investment in an unreliable and intermittent power source is not attractive to power companies, the German government decreed that turbine operators be given 20 cents in incentives for every kWh generated on the high seas.
One of the Alpha Ventus wind turbines being towed to its installation site.
As a result, Germany's energy consumers must pay 20 cents per kWh generated, plus an additional 5 cents per kWh for transmission costs. They must pay this regardless of whether the electricity is needed at the moment or not. Indeed, due to the intermittent and highly variable nature of the wind, a kWh of wind electricity is worth less than 3 cents on the Leipzig Power Exchange. Only a government bureaucrat would think this sound policy.
This ill-advised foray into wind comes as a complement to Germany's breakneck installation of solar cells, a move that was criticized for driving up world solar panel prices and thereby preventing their installation in sunnier, developing nations where they would do the most good. The sad truth is that Germany is poorly situated for solar power. Located in higher latitudes with a cloudy climate, a solar cell in Germany will only produce 40-50% of the energy that it would if located in North Africa or other sunny equatorial location. As we stated in the first chapter of The Energy Gap:
As for wind power, the German Energy Agency (Deutsche Energie-Agentur, or DENA) was projecting an additional 20.4 GW of wind power by 2020, but that forecast has been reduced to just 10 GW and even that estimate may be optimistic.
According to Eduard Sala de Vedruna, a senior analyst tracking wind energy for the consultancy Emerging Energy Research: “These 10 gigawatts are not going to be installed by 2020. That’s a fact.” He puts the figure at 8.4 GW. All the proposed turbines running full out would deliver less than a quarter of the 149 billion kWh currently generated by Germany’s nuclear reactors each year.
Last year, DENA determined that cancellation of coal projects and shutting down existing nuclear plants could leave Germany without sufficient conventional generating capacity to back up its wind and solar power. According to DENA’s CEO, Stephan Kohler, the generation shortfall could reach 12 GW by 2020—Germany has a looming energy gap.
We are not alone in issuing such warnings, According to an article by Edgar Gaertner, “Germany’s Offshore Wind: Wasted Resources, Environmental Blight,” Germans should prepare for significantly higher electricity bills and more frequent blackouts.
“If all German wind power projects are realized as planned, the country will incur economic losses well over 100 billion Euros by 2030,” says Thomas Heinzow, an environmental economist at the University of Hamburg. “The only word that describes this ‘world improvement’ strategy is suicidal.”
The Alpha Ventus wind farm in the North Sea.
Moreover, most of Europe, the US, Japan, China, India and all other developed or rapidly developing countries are facing the same uncertain energy future. Everywhere, politicians, urged on by environmentalists and vested interests in the green energy business, are backing rapid expansion of wind energy. Even though it is not economically viable, it has the dubious distinction of being the most affordable alternative energy choice. And economic problems are not the only drawbacks of wind power.
As reported on The Resilient Earth website, wind power reaps a deadly harvest of birds and bats wherever they operate. Please refer to “Fighting CO2 Endangers Raptors” and “Wind Power: Green and Deadly ” for more of the grisly details.
What can be done to stop this senseless rush to expand wind power? Become knowledgeable about the problem and then take political action. Physicist and environmental advocate John Droz Jr., who publishes an excellent energy oriented news letter, has collected the facts about wind power. His mission statement is: “We believe that we have environmental and energy issues, and we believe that these matters should be resolved by applying the Scientific Method.” According to Droz:
In my thirty plus years of working on environmental issues, I’ve learned a few things. One is that our “representatives” are often anything but. Another is that government bureaucrats have little interest in taking initiative, no matter how much sense it might make.
To help prepare people to face their own politicians and the environmentalist opposition, Droze has put out a pair of short, animated talking point videos. In the first we meet Dick and Jane, who are having a discussion of wind power and a proposed local wind farm project:
In the second, Jane speaks with her town representative:
OK, they are not Avatar, but the information they contain is much less biased than the “hidden” environmentalism of James Cameron's latest cinematic confection. For more information, including tips on how to avoid unproductive arguments and becoming bogged down in technical details, see this PDF. John also has a slide show available on line at Electrical Energy: Sound Scientific Solutions. These items are not the only information available on the web but they are a good place to start if you are ready to become politically active in your community.
If there was ever an object lesson supporting the need for responsible citizens to become politically active regarding energy and environmental matters just look at the deal making going on the the US Congress over the tax cut renewal bill. In order to secure enough votes for the bill, a renewal of tax credits for green energy, including ethanol and wind power, have been tacked on.
This is a blatant payoff for special interests who know how the Washington game is played. In Congress this is called “compromise,” any place else it would be called bribery. If you are a US citizen contact your representative and senators!
Be safe, enjoy the interglacial and stay skeptical.
A Dying Breeze
Submitted by Doug L. Hoffman on Sun, 12/12/2010 - 16:00
The Alpha Ventus Wind Park is the first of its kind: a deep water wind farm in the stormy North Sea. It is composed of 12 turbines that together will generate 60MW of electrical power. When fully operational, the farm will be able to power 50,000 households. But barely two months after the ceremony opening Germany’s first deep water wind farm, six of the newly installed wind turbines were idle. This was not due to a lack of wind but because of gearbox damage: two turbines had to be replaced entirely, the other four repaired on site. Problems with Alpha Ventus highlight a series of poor decisions—a precipitous move to shut down working nuclear plants, rampant installation of solar cells, and a headlong rush into offshore wind generation among them—that could well have Germany facing blackouts in the not too distant future.
The six turbines that have been operating since August 2009 have supplied about 13 million kWh of energy to the grid. This is in contrast with the 262.8 million kWh of electricity that would have been generated if the turbines had operated at their rated capacity for a year. Even when located in the windy North Sea, wind turbines simply do not produce at anywhere near their rated output. Alpha Ventus generates only 1/20th its rated capacity—enough energy for 2,500 homes, not 50,000.
The problems with Alpha Ventus helps demonstrate the folly of forced installation of green power. In this case, each turbine costs $5,200 (€4,000) per kilowatt in upfront investment. This comes to a hefty $26 million (€20 million) for each 5MW turbine. Because such heavy investment in an unreliable and intermittent power source is not attractive to power companies, the German government decreed that turbine operators be given 20 cents in incentives for every kWh generated on the high seas.
One of the Alpha Ventus wind turbines being towed to its installation site.
As a result, Germany's energy consumers must pay 20 cents per kWh generated, plus an additional 5 cents per kWh for transmission costs. They must pay this regardless of whether the electricity is needed at the moment or not. Indeed, due to the intermittent and highly variable nature of the wind, a kWh of wind electricity is worth less than 3 cents on the Leipzig Power Exchange. Only a government bureaucrat would think this sound policy.
This ill-advised foray into wind comes as a complement to Germany's breakneck installation of solar cells, a move that was criticized for driving up world solar panel prices and thereby preventing their installation in sunnier, developing nations where they would do the most good. The sad truth is that Germany is poorly situated for solar power. Located in higher latitudes with a cloudy climate, a solar cell in Germany will only produce 40-50% of the energy that it would if located in North Africa or other sunny equatorial location. As we stated in the first chapter of The Energy Gap:
As for wind power, the German Energy Agency (Deutsche Energie-Agentur, or DENA) was projecting an additional 20.4 GW of wind power by 2020, but that forecast has been reduced to just 10 GW and even that estimate may be optimistic.
According to Eduard Sala de Vedruna, a senior analyst tracking wind energy for the consultancy Emerging Energy Research: “These 10 gigawatts are not going to be installed by 2020. That’s a fact.” He puts the figure at 8.4 GW. All the proposed turbines running full out would deliver less than a quarter of the 149 billion kWh currently generated by Germany’s nuclear reactors each year.
Last year, DENA determined that cancellation of coal projects and shutting down existing nuclear plants could leave Germany without sufficient conventional generating capacity to back up its wind and solar power. According to DENA’s CEO, Stephan Kohler, the generation shortfall could reach 12 GW by 2020—Germany has a looming energy gap.
We are not alone in issuing such warnings, According to an article by Edgar Gaertner, “Germany’s Offshore Wind: Wasted Resources, Environmental Blight,” Germans should prepare for significantly higher electricity bills and more frequent blackouts.
“If all German wind power projects are realized as planned, the country will incur economic losses well over 100 billion Euros by 2030,” says Thomas Heinzow, an environmental economist at the University of Hamburg. “The only word that describes this ‘world improvement’ strategy is suicidal.”
The Alpha Ventus wind farm in the North Sea.
Moreover, most of Europe, the US, Japan, China, India and all other developed or rapidly developing countries are facing the same uncertain energy future. Everywhere, politicians, urged on by environmentalists and vested interests in the green energy business, are backing rapid expansion of wind energy. Even though it is not economically viable, it has the dubious distinction of being the most affordable alternative energy choice. And economic problems are not the only drawbacks of wind power.
As reported on The Resilient Earth website, wind power reaps a deadly harvest of birds and bats wherever they operate. Please refer to “Fighting CO2 Endangers Raptors” and “Wind Power: Green and Deadly ” for more of the grisly details.
What can be done to stop this senseless rush to expand wind power? Become knowledgeable about the problem and then take political action. Physicist and environmental advocate John Droz Jr., who publishes an excellent energy oriented news letter, has collected the facts about wind power. His mission statement is: “We believe that we have environmental and energy issues, and we believe that these matters should be resolved by applying the Scientific Method.” According to Droz:
In my thirty plus years of working on environmental issues, I’ve learned a few things. One is that our “representatives” are often anything but. Another is that government bureaucrats have little interest in taking initiative, no matter how much sense it might make.
To help prepare people to face their own politicians and the environmentalist opposition, Droze has put out a pair of short, animated talking point videos. In the first we meet Dick and Jane, who are having a discussion of wind power and a proposed local wind farm project:
In the second, Jane speaks with her town representative:
OK, they are not Avatar, but the information they contain is much less biased than the “hidden” environmentalism of James Cameron's latest cinematic confection. For more information, including tips on how to avoid unproductive arguments and becoming bogged down in technical details, see this PDF. John also has a slide show available on line at Electrical Energy: Sound Scientific Solutions. These items are not the only information available on the web but they are a good place to start if you are ready to become politically active in your community.
If there was ever an object lesson supporting the need for responsible citizens to become politically active regarding energy and environmental matters just look at the deal making going on the the US Congress over the tax cut renewal bill. In order to secure enough votes for the bill, a renewal of tax credits for green energy, including ethanol and wind power, have been tacked on.
This is a blatant payoff for special interests who know how the Washington game is played. In Congress this is called “compromise,” any place else it would be called bribery. If you are a US citizen contact your representative and senators!
Be safe, enjoy the interglacial and stay skeptical.
ONTARIO WIND FARMS IN 10-15 YEARS?
Very likely.
http://wattsupwiththat.com/2011/03/19/the-reality-of-wind-turbines-in-california-video/
What's the incentive of these private wind companies to maintain their turbines? Get the first round of free money, then not spend the millions needed to maintain them, and they get abandoned as they start to fail. Guess who is not only out the initial cost of building them, but also the costs to remove their rusting hulks? You.
Richard
http://wattsupwiththat.com/2011/03/19/the-reality-of-wind-turbines-in-california-video/
What's the incentive of these private wind companies to maintain their turbines? Get the first round of free money, then not spend the millions needed to maintain them, and they get abandoned as they start to fail. Guess who is not only out the initial cost of building them, but also the costs to remove their rusting hulks? You.
Richard
Saturday, March 19, 2011
Power firms were paid millions not to generate power
By John Spears Thu Mar 17 2011
http://www.moneyville.ca/article/956001--power-companies-paid-millions-not-to-generate-elecrtricity?bn=1
If you’ve paid a steep hydro bill lately, you might want to take a deep breath before reading this.
Here’s what Ontario electricity market’s official watchdog has turned up in its latest report:
• Since Ontario’s electricity market opened in 2002, electricity generators have been paid millions for not producing power;
• Traders have been paid millions more for not importing power;
• One generator has reaped millions by repeatedly switching itself off, then back on.
And consumers have paid the tab.
Consider this sentence from the panel’s report, outlining payments called CMSC credits that have been awarded to a handful of market players in northwestern Ontario:
“Of the $360 million in CMSC payments, $161 million (45 per cent) was paid for not generating, and $146 million (40 per cent) was paid for not importing . . .” the panel says.
It notes deadpan: “This design has a few fundamental defects.”
The panel doesn’t stop there.
It says one unnamed generator has discovered a loophole allowing it to wring nearly $19 million in extra payments out of the system by unnecessarily switching on and off during the day — the equivalent of a working stiff earning a bonus every time he makes a coffee run to Timmy’s.
The Independent Electricity System Operator says that it has been working to curb the expensive practices. And the Ontario Energy Board has asked for a report next months on what steps are being taken.
Here’s how the panel says some players have been working the system:
Some generators, especially in northwestern Ontario, have exploited the fact that transmission lines can only carry so much power. That’s called “congestion.”
A few smart operators have figured out how to anticipate when congestion is likely, and to offer to sell power at an attractive price during that time.
The bid is accepted, but when the time comes to send the power, there’s no room on the transmission line. Nonetheless, the generator still receives what’s called a “constrained off” payment because originally the bid had been booked.
Power importers in the northwest playing the same strategy do even better than generators. The panel figures they get paid more than three times as much as importers elsewhere in the province by collecting congestion payments.
Money for the extra payments is built into the price paid by every electricity user in the province.
Overall, the panel says market players in the northwest area of the province have scooped up 33 per cent of the congestion payments since 2002, although they account for only 4 per cent of generating capacity and 10 per cent of import capacity.
It does not name any of the players.
A second strategy has been exploited more recently largely by an unnamed generator, which has discovered there’s money to be made by switching off and on.
Under some circumstances, fossil fuel generators can qualify for guaranteed payments that recognize the costs a unit incurs when it starts up.
Not only do those who qualify get a guaranteed cost payment; they get a guaranteed floor price for their output for a certain length of time. And there’s no ceiling; if the market price happens to go higher, they get the improved price.
The panel gives the example of a generator that shuts down for two hours, then restarts. By staying online, the generator would have collected $10,000 in revenue. But by shutting off, then back on, a qualifying generator gets about $50,000 in revenue, which all ultimately comes from the pockets of consumers.
In a six-month period last year, the panel found 426 occasions when generators had shut down, then restarted in two hours or less. One generator was responsible for 336 of the shut-downs.
It figures that cost the marketplace about $19 million — 95 per cent of which went to a single player.
Terry Young, vice-president of the IESO, said in an interview that the agency is aware of the issues and has started a consultation process with market participants about changing some rules.
But it will take some time, he said: “You’re talking about a complex situation; you’re not going to get this done by lunch.”
He noted that the province’s long term energy plan calls for more north-south transmission capacity, which would make it easier for power to flow from northwestern Ontario and trigger fewer congestion payments.
Young said the agency’s compliance staff monitors the market, and are talking to some of the players whose actions were highlighted by the panel, such as frequently switching on and off.
“We do recognize this is an area that needs to be dealt with,” he said.
The panel has suggested that generators should be able to qualify for the shut-down and start-up program only once per day. The IESO will study that option and others, he said.
http://www.moneyville.ca/article/956001--power-companies-paid-millions-not-to-generate-elecrtricity?bn=1
If you’ve paid a steep hydro bill lately, you might want to take a deep breath before reading this.
Here’s what Ontario electricity market’s official watchdog has turned up in its latest report:
• Since Ontario’s electricity market opened in 2002, electricity generators have been paid millions for not producing power;
• Traders have been paid millions more for not importing power;
• One generator has reaped millions by repeatedly switching itself off, then back on.
And consumers have paid the tab.
Consider this sentence from the panel’s report, outlining payments called CMSC credits that have been awarded to a handful of market players in northwestern Ontario:
“Of the $360 million in CMSC payments, $161 million (45 per cent) was paid for not generating, and $146 million (40 per cent) was paid for not importing . . .” the panel says.
It notes deadpan: “This design has a few fundamental defects.”
The panel doesn’t stop there.
It says one unnamed generator has discovered a loophole allowing it to wring nearly $19 million in extra payments out of the system by unnecessarily switching on and off during the day — the equivalent of a working stiff earning a bonus every time he makes a coffee run to Timmy’s.
The Independent Electricity System Operator says that it has been working to curb the expensive practices. And the Ontario Energy Board has asked for a report next months on what steps are being taken.
Here’s how the panel says some players have been working the system:
Some generators, especially in northwestern Ontario, have exploited the fact that transmission lines can only carry so much power. That’s called “congestion.”
A few smart operators have figured out how to anticipate when congestion is likely, and to offer to sell power at an attractive price during that time.
The bid is accepted, but when the time comes to send the power, there’s no room on the transmission line. Nonetheless, the generator still receives what’s called a “constrained off” payment because originally the bid had been booked.
Power importers in the northwest playing the same strategy do even better than generators. The panel figures they get paid more than three times as much as importers elsewhere in the province by collecting congestion payments.
Money for the extra payments is built into the price paid by every electricity user in the province.
Overall, the panel says market players in the northwest area of the province have scooped up 33 per cent of the congestion payments since 2002, although they account for only 4 per cent of generating capacity and 10 per cent of import capacity.
It does not name any of the players.
A second strategy has been exploited more recently largely by an unnamed generator, which has discovered there’s money to be made by switching off and on.
Under some circumstances, fossil fuel generators can qualify for guaranteed payments that recognize the costs a unit incurs when it starts up.
Not only do those who qualify get a guaranteed cost payment; they get a guaranteed floor price for their output for a certain length of time. And there’s no ceiling; if the market price happens to go higher, they get the improved price.
The panel gives the example of a generator that shuts down for two hours, then restarts. By staying online, the generator would have collected $10,000 in revenue. But by shutting off, then back on, a qualifying generator gets about $50,000 in revenue, which all ultimately comes from the pockets of consumers.
In a six-month period last year, the panel found 426 occasions when generators had shut down, then restarted in two hours or less. One generator was responsible for 336 of the shut-downs.
It figures that cost the marketplace about $19 million — 95 per cent of which went to a single player.
Terry Young, vice-president of the IESO, said in an interview that the agency is aware of the issues and has started a consultation process with market participants about changing some rules.
But it will take some time, he said: “You’re talking about a complex situation; you’re not going to get this done by lunch.”
He noted that the province’s long term energy plan calls for more north-south transmission capacity, which would make it easier for power to flow from northwestern Ontario and trigger fewer congestion payments.
Young said the agency’s compliance staff monitors the market, and are talking to some of the players whose actions were highlighted by the panel, such as frequently switching on and off.
“We do recognize this is an area that needs to be dealt with,” he said.
The panel has suggested that generators should be able to qualify for the shut-down and start-up program only once per day. The IESO will study that option and others, he said.
Friday, March 18, 2011
Taxing energy is a bad plan for a host of reasons.
Why a “Revenue Neutral” Energy Tax Isn’t
Posted on March 18, 2011 by Willis Eschenbach
Over at her excellent blog, Judith Curry is hosting a discussion that in part is about “revenue-neutral” carbon (in reality energy) taxes. This is another example of where being a generalist is an advantage. I’ve started and run businesses, so I know why revenue neutral isn’t neutral at all when it comes to an energy tax.
The reason that energy taxes are not revenue neutral is that although the government does indeed return the taxes to the consumers, there is a hidden effect working under the radar that most folks don’t think about.
A businessman prices any product based on how much money he has in it. A typical rule of thumb for manufactured products, for example, is that your product should sell for around twice what you have directly invested in producing it.
So a typical product cost analysis might look something like this:
Widget Production Cost = $10 materials + $10 labor + $10 energy = $30 total cost per widget
Widget Sales Price ≈ 2 * Widget Production Cost ≈ $60 per widget
The businessman has to do that, he or she has to get a percentage return on the money that they have tied up in the product. So I go in and buy a widget, I pay $60, and go home happy.
Now, remember that the deal with a “revenue-neutral tax” is that the consumer is supposed to get the money back from the government. According to the pundits, this means that a revenue-neutral tax won’t slow down the economy, since the taxes aren’t removed from circulation, instead they’re returned right back to the consumers. We’ll ignore the details on how that is supposed to happen in a fair and equitable manner, although that’s another interesting can of worms. For our present purposes, we’ll leave that worm tin hermetically sealed and just assume that the US Government in its brilliant wisdom has decided to impose a $10 tax on the energy that’s used to make widgets. To balance that out and make it all revenue neutral, they’ll give you that money back as a crisp new $10 bill when you buy a widget. Perfectly revenue neutral. What’s not to like?
Here’s the difficulty. Let’s run the new widget costing numbers including the tax.
Widget Production Cost = $10 materials + $10 labor + $20 energy = $40 total cost
Widget Sales Price = 2 * Widget Production Cost = $80 per widget
So I go in to buy another widget, I give the widget man $80, and the Government gives me $10 and says everything is for the best in this, the best of all possible worlds. It’s all balanced since the tax was $10 and I got the $10 back, so the Government and I are exactly even, shake hands and part revenue-neutral friends …
Except for the part where I’m short ten bucks, and the widget maker has made ten dollars extra for the same widget. The revenue is neutral, but despite that, in the case of energy taxes the net effect is to slow down the economy.
Why will the economy slow? If we have the same amount of goods at higher prices, demand will fall and the economy will slow. It’s basic economics.
And that’s why a “revenue-neutral” energy tax isn’t neutral at all … and more to the point, it’s one reason why taxing energy in any form is a really dumb idea. Even when it’s revenue-neutral it slows the economic cycle, and when it’s not revenue-neutral, it slows it even more.
w.
PS - In addition, an energy tax is a very regressive tax. An extra $10 energy tax for the energy used to commute to work means little to the CEO, but may break the bank of the janitor. Taxing energy is a bad plan for a host of reasons.
Posted on March 18, 2011 by Willis Eschenbach
Over at her excellent blog, Judith Curry is hosting a discussion that in part is about “revenue-neutral” carbon (in reality energy) taxes. This is another example of where being a generalist is an advantage. I’ve started and run businesses, so I know why revenue neutral isn’t neutral at all when it comes to an energy tax.
The reason that energy taxes are not revenue neutral is that although the government does indeed return the taxes to the consumers, there is a hidden effect working under the radar that most folks don’t think about.
A businessman prices any product based on how much money he has in it. A typical rule of thumb for manufactured products, for example, is that your product should sell for around twice what you have directly invested in producing it.
So a typical product cost analysis might look something like this:
Widget Production Cost = $10 materials + $10 labor + $10 energy = $30 total cost per widget
Widget Sales Price ≈ 2 * Widget Production Cost ≈ $60 per widget
The businessman has to do that, he or she has to get a percentage return on the money that they have tied up in the product. So I go in and buy a widget, I pay $60, and go home happy.
Now, remember that the deal with a “revenue-neutral tax” is that the consumer is supposed to get the money back from the government. According to the pundits, this means that a revenue-neutral tax won’t slow down the economy, since the taxes aren’t removed from circulation, instead they’re returned right back to the consumers. We’ll ignore the details on how that is supposed to happen in a fair and equitable manner, although that’s another interesting can of worms. For our present purposes, we’ll leave that worm tin hermetically sealed and just assume that the US Government in its brilliant wisdom has decided to impose a $10 tax on the energy that’s used to make widgets. To balance that out and make it all revenue neutral, they’ll give you that money back as a crisp new $10 bill when you buy a widget. Perfectly revenue neutral. What’s not to like?
Here’s the difficulty. Let’s run the new widget costing numbers including the tax.
Widget Production Cost = $10 materials + $10 labor + $20 energy = $40 total cost
Widget Sales Price = 2 * Widget Production Cost = $80 per widget
So I go in to buy another widget, I give the widget man $80, and the Government gives me $10 and says everything is for the best in this, the best of all possible worlds. It’s all balanced since the tax was $10 and I got the $10 back, so the Government and I are exactly even, shake hands and part revenue-neutral friends …
Except for the part where I’m short ten bucks, and the widget maker has made ten dollars extra for the same widget. The revenue is neutral, but despite that, in the case of energy taxes the net effect is to slow down the economy.
Why will the economy slow? If we have the same amount of goods at higher prices, demand will fall and the economy will slow. It’s basic economics.
And that’s why a “revenue-neutral” energy tax isn’t neutral at all … and more to the point, it’s one reason why taxing energy in any form is a really dumb idea. Even when it’s revenue-neutral it slows the economic cycle, and when it’s not revenue-neutral, it slows it even more.
w.
PS - In addition, an energy tax is a very regressive tax. An extra $10 energy tax for the energy used to commute to work means little to the CEO, but may break the bank of the janitor. Taxing energy is a bad plan for a host of reasons.
Thursday, March 17, 2011
Earth Hour: A Dissent
by Ross McKitrick
http://wattsupwiththat.com/2011/03/17/earth-hour-a-dissent/#more-36008
In 2009 I was asked by a journalist for my thoughts on the importance of Earth Hour.
Here is my response.
I abhor Earth Hour. Abundant, cheap electricity has been the greatest source of human liberation in the 20th century. Every material social advance in the 20th century depended on the proliferation of inexpensive and reliable electricity.
Giving women the freedom to work outside the home depended on the availability of electrical appliances that free up time from domestic chores. Getting children out of menial labour and into schools depended on the same thing, as well as the ability to provide safe indoor lighting for reading.
Development and provision of modern health care without electricity is absolutely impossible. The expansion of our food supply, and the promotion of hygiene and nutrition, depended on being able to irrigate fields, cook and refrigerate foods, and have a steady indoor supply of hot water.
Many of the world’s poor suffer brutal environmental conditions in their own homes because of the necessity of cooking over indoor fires that burn twigs and dung. This causes local deforestation and the proliferation of smoke- and parasite-related lung diseases.
Anyone who wants to see local conditions improve in the third world should realize the importance of access to cheap electricity from fossil-fuel based power generating stations. After all, that’s how the west developed.
The whole mentality around Earth Hour demonizes electricity. I cannot do that, instead I celebrate it and all that it has provided for humanity.
Earth Hour celebrates ignorance, poverty and backwardness. By repudiating the greatest engine of liberation it becomes an hour devoted to anti-humanism. It encourages the sanctimonious gesture of turning off trivial appliances for a trivial amount of time, in deference to some ill-defined abstraction called “the Earth,” all the while hypocritically retaining the real benefits of continuous, reliable electricity.
People who see virtue in doing without electricity should shut off their fridge, stove, microwave, computer, water heater, lights, TV and all other appliances for a month, not an hour. And pop down to the cardiac unit at the hospital and shut the power off there too.
I don’t want to go back to nature. Travel to a zone hit by earthquakes, floods and hurricanes to see what it’s like to go back to nature. For humans, living in “nature” meant a short life span marked by violence, disease and ignorance. People who work for the end of poverty and relief from disease are fighting against nature. I hope they leave their lights on.
Here in Ontario, through the use of pollution control technology and advanced engineering, our air quality has dramatically improved since the 1960s, despite the expansion of industry and the power supply.
If, after all this, we are going to take the view that the remaining air emissions outweigh all the benefits of electricity, and that we ought to be shamed into sitting in darkness for an hour, like naughty children who have been caught doing something bad, then we are setting up unspoiled nature as an absolute, transcendent ideal that obliterates all other ethical and humane obligations.
No thanks.
I like visiting nature but I don’t want to live there, and I refuse to accept the idea that civilization with all its tradeoffs is something to be ashamed of.
Ross McKitrick
Professor of Economics
University of Guelph
http://wattsupwiththat.com/2011/03/17/earth-hour-a-dissent/#more-36008
In 2009 I was asked by a journalist for my thoughts on the importance of Earth Hour.
Here is my response.
I abhor Earth Hour. Abundant, cheap electricity has been the greatest source of human liberation in the 20th century. Every material social advance in the 20th century depended on the proliferation of inexpensive and reliable electricity.
Giving women the freedom to work outside the home depended on the availability of electrical appliances that free up time from domestic chores. Getting children out of menial labour and into schools depended on the same thing, as well as the ability to provide safe indoor lighting for reading.
Development and provision of modern health care without electricity is absolutely impossible. The expansion of our food supply, and the promotion of hygiene and nutrition, depended on being able to irrigate fields, cook and refrigerate foods, and have a steady indoor supply of hot water.
Many of the world’s poor suffer brutal environmental conditions in their own homes because of the necessity of cooking over indoor fires that burn twigs and dung. This causes local deforestation and the proliferation of smoke- and parasite-related lung diseases.
Anyone who wants to see local conditions improve in the third world should realize the importance of access to cheap electricity from fossil-fuel based power generating stations. After all, that’s how the west developed.
The whole mentality around Earth Hour demonizes electricity. I cannot do that, instead I celebrate it and all that it has provided for humanity.
Earth Hour celebrates ignorance, poverty and backwardness. By repudiating the greatest engine of liberation it becomes an hour devoted to anti-humanism. It encourages the sanctimonious gesture of turning off trivial appliances for a trivial amount of time, in deference to some ill-defined abstraction called “the Earth,” all the while hypocritically retaining the real benefits of continuous, reliable electricity.
People who see virtue in doing without electricity should shut off their fridge, stove, microwave, computer, water heater, lights, TV and all other appliances for a month, not an hour. And pop down to the cardiac unit at the hospital and shut the power off there too.
I don’t want to go back to nature. Travel to a zone hit by earthquakes, floods and hurricanes to see what it’s like to go back to nature. For humans, living in “nature” meant a short life span marked by violence, disease and ignorance. People who work for the end of poverty and relief from disease are fighting against nature. I hope they leave their lights on.
Here in Ontario, through the use of pollution control technology and advanced engineering, our air quality has dramatically improved since the 1960s, despite the expansion of industry and the power supply.
If, after all this, we are going to take the view that the remaining air emissions outweigh all the benefits of electricity, and that we ought to be shamed into sitting in darkness for an hour, like naughty children who have been caught doing something bad, then we are setting up unspoiled nature as an absolute, transcendent ideal that obliterates all other ethical and humane obligations.
No thanks.
I like visiting nature but I don’t want to live there, and I refuse to accept the idea that civilization with all its tradeoffs is something to be ashamed of.
Ross McKitrick
Professor of Economics
University of Guelph
Tuesday, March 15, 2011
FIT PROGRAM SCREWUPS
I've gotten 2 emails in the last month from people who have installed solar panels, at great expense ($50K plus) and are getting screwed over by Hydro One.
One complaint was not getting hooked up after they bought and mounted their panels. The other was much more interesting. Seems Hydro One is not paying this person what they produce, but much less. Nearly 20% less Hydro One claims this person put into the grid compared to what their own monitoring control claims.
Both parties want to sue H1.
Problem is, their plight is not because of H1. It's because of the Liberal's, their Green Energy Act, and what the Liberals are doing in an attempt to keep the FIT program under control.
Apparently there are some 20,000 applications submitted to the government for solar FIT hookup. Assuming a modest $1000 per year these people would get for power, that's $20,000,000 per year from your pocket into the pockets of these solar owners.
These owners don't even pay more property taxes because of the panels even though it should increase their property value. Another gift from the Liberals.
I will be blunt. I have no sympathy with solar panel FIT people. Hey, if you want to have panels to supplement your own power, then go for it. But do not expect the rest of us to suffer high bills so they can retire on power income. The larger picture is more important than individuals getting screwed because of panels.
My goal is to get power rates back to affordable levels, and to provide power based on production methods that have a high Capacity Value. Capacity Value is the rate of output when demand is within 10% of peak (that value is set by the IESO). Solar and wind have zero Capacity Value hence my goal is to kill the FIT program completely, including existing contracts. I favour the Czech method of introducing a 25% surtax on solar and wind producers. That's the route we should go.
What was also interesting about the email was the power the person produced. I had heard that these panels would supply less than 20% of a normal home. With the numbers she gave me of their 2010 production, it's worse than that. She said they produced 1900kWh of power in 2010. My place, a bit lower than normal, was around 19,000 for the year. That's 10% those panels produced of what I need. Also interesting she agreed that their winter output is much less than summer output. You think! Like that wasn't predictable.
Now this person wants to get off the grid. So do the math. They would need 10 times the number of panels, likely 20 times because the panels not only have to power the home, but to power their home at night they would need batteries. Some 100 batteries at $350 each. The panels would need to also recharge those batteries during the day as well as power the house (hence more panels than you need to power just the house.)
The batteries only last 6-8 years, and need a complete replacement. So going off grid, unless you want to live like we did in the 1800's, is not possible. Not with our technology, most of which is now required.
So what's my take on the problems these panel owners are having with H1, and going have more of in the future?
As they saying goes, play with the Devil expect to get burned.
This is just the beginning of problems for panel owners.
One complaint was not getting hooked up after they bought and mounted their panels. The other was much more interesting. Seems Hydro One is not paying this person what they produce, but much less. Nearly 20% less Hydro One claims this person put into the grid compared to what their own monitoring control claims.
Both parties want to sue H1.
Problem is, their plight is not because of H1. It's because of the Liberal's, their Green Energy Act, and what the Liberals are doing in an attempt to keep the FIT program under control.
Apparently there are some 20,000 applications submitted to the government for solar FIT hookup. Assuming a modest $1000 per year these people would get for power, that's $20,000,000 per year from your pocket into the pockets of these solar owners.
These owners don't even pay more property taxes because of the panels even though it should increase their property value. Another gift from the Liberals.
I will be blunt. I have no sympathy with solar panel FIT people. Hey, if you want to have panels to supplement your own power, then go for it. But do not expect the rest of us to suffer high bills so they can retire on power income. The larger picture is more important than individuals getting screwed because of panels.
My goal is to get power rates back to affordable levels, and to provide power based on production methods that have a high Capacity Value. Capacity Value is the rate of output when demand is within 10% of peak (that value is set by the IESO). Solar and wind have zero Capacity Value hence my goal is to kill the FIT program completely, including existing contracts. I favour the Czech method of introducing a 25% surtax on solar and wind producers. That's the route we should go.
What was also interesting about the email was the power the person produced. I had heard that these panels would supply less than 20% of a normal home. With the numbers she gave me of their 2010 production, it's worse than that. She said they produced 1900kWh of power in 2010. My place, a bit lower than normal, was around 19,000 for the year. That's 10% those panels produced of what I need. Also interesting she agreed that their winter output is much less than summer output. You think! Like that wasn't predictable.
Now this person wants to get off the grid. So do the math. They would need 10 times the number of panels, likely 20 times because the panels not only have to power the home, but to power their home at night they would need batteries. Some 100 batteries at $350 each. The panels would need to also recharge those batteries during the day as well as power the house (hence more panels than you need to power just the house.)
The batteries only last 6-8 years, and need a complete replacement. So going off grid, unless you want to live like we did in the 1800's, is not possible. Not with our technology, most of which is now required.
So what's my take on the problems these panel owners are having with H1, and going have more of in the future?
As they saying goes, play with the Devil expect to get burned.
This is just the beginning of problems for panel owners.
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